Commodities
Gold prices sink as safe haven rally pauses, M. East tensions in focus
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© Reuters.
Investing.com– Gold prices fell on Monday, reversing course after increased safe haven demand spurred a series of strong gains in the yellow metal, with focus remaining on any potential spillover from the Israel-Hamas war.
The yellow metal saw a touch of profit taking after jumping over 5% in the prior week, as the onset of the Israel-Hamas war sent investors dashing for safe haven assets.
Markets were now watching to see whether the Israel-Hamas conflict would spill over into the Middle East region, as Israel prepares a ground offensive in the Gaza strip.
Gold’s most-active contract on New York’s Comex, December, settled down $7.20, or 0.4%, at $1,934.30 an ounce.
The , more closely watched by some traders than futures, was at $1,919.46.65 by 15:50 ET (19:50 GMT), down $13.36, or 0.7%, on the day.
-Higher U.S. rate outlook limits gold’s appeal
Stronger-than-expected U.S. released last week pointed to a sustained hawkish stance from the Federal Reserve, which is likely to keep interest rates higher for longer.
This notion had battered gold prices over the past year, and with U.S. rates set to remain stubbornly high, is likely to limit any major upside in the yellow metal.
While gold did see some strong gains on safe haven demand, the dollar still largely remained the safe haven of choice. Inflows to the saw it come close to a 10-month peak last week.
Higher interest rates bode poorly for gold, given that they push up the opportunity cost of investing in the yellow metal. This notion had limited any major gains in the yellow metal, even as worsening global economic conditions made for increased safe haven demand.
Copper rebounds with China GDP in focus
Among industrial metals, copper prices rose on Monday after coming close to a five-month low in the prior week.
settled up 0.1% at $3.5820 a pound in New York trading.
Focus this week is squarely on key economic readings from major copper importer China, mainly a reading on third-quarter .
The reading is expected to show that Chinese economic growth weakened further in the prior quarter as business activity showed little signs of improvement despite some stimulus measures.
Such a trend bodes poorly for Chinese copper demand, and could spark more weakness in the red metal in the coming weeks. Concerns over China have been a key dampener on copper prices over the past year.
The People’s Bank of China is also expected to decide on its key this week, although a change appears unlikely.
(Barani Krishnan contributed to this report)
Commodities
Oil prices settle lower after weak August jobs report adds to demand concerns
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Investing.com — Oil prices settled lower Friday, ending the week with a loss as weaker U.S. nonfarm payrolls stoked concerns about an economic-led slowdown in crude demand.
At 2:30 p.m. ET (1430 GMT), the futures (WTI) traded fell 2.1% to settle at $67.67 a barrel, while contract fell 2.2% to $71.06 per barrel.
U.S. economic slowdown worries resurface after weak jobs report
The US economy added fewer jobs than anticipated in August, but rose from a sharply revised July figure, according to Labor Department data that could factor into the Federal Reserve’s next policy decisions.
Nonfarm payrolls came in at 142,000 last month, up from a downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, up from the initial July mark of 114,000.
Following the release, bets that the Fed will introduce a deeper 50 basis-point rate cut — rather than a shallower 25 basis-point reduction — increased.
Concerns about the demand come just a day after OPEC+ said it had agreed to postpone a planned increase in oil production for October and November.
U.S., Europe working on Iran sanctions
Geopolitical tensions ratcheted up on Friday after the U.S. and Europe they were working on sanctions to impose on Iran after the Tehran sent missiles to Russia.
The U.S. had previously warned Iran about transferring missiles to Russia, saying it would represent a major escalation in Iran’s support of Russia’s war against Ukraine.
Commodities
Goldman Sachs expects OPEC+ production increases to start in December
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(Reuters) – Goldman Sachs adjusted its expectations for OPEC+ oil production saying it now expects three months of production increases starting from December instead of October, the bank said in a note on Friday.
OPEC+ has agreed to delay a planned oil output increase for October and November, the producers group said on Thursday after crude prices hit their lowest in nine months, adding it could further pause or reverse the hikes if needed.
However Goldman Sachs maintained its range of $70-85 per barrel and a December 2025 Brent forecast at $74 per barrel.
The investment bank expects the effects of a modest reduction in OPEC+ supply in the upcoming months to be counterbalanced by easing effects from the current softness in China’s demand and faster-than-expected recovery of Libya’s supply.
“We still see the risks to our $70-85 range as skewed to the downside given high spare capacity, and downside risks to demand from weakness in China and potential trade tensions,” Goldman Sachs said.
Brent crude futures were down $1.63, or 2.24%, to $71.06 a barrel on Friday, their lowest level since December 2021. U.S. West Texas Intermediate crude futures fell $1.48 on Friday, or 2.14%, to $67.67, their lowest since June 2023. [O/R]
Commodities
Citi, Bank of America see oil prices potentially going to $60
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Investing.com — Strategists at Citi Research said oil prices could decline to around $60 per barrel by 2025, citing a significant market surplus as the primary driver.
While recent supply disruptions in Libya and a delayed production cut unwinding by OPEC+ have offered short-term support for Brent prices in the $70-72 range, Citi views this as temporary.
“At the time of writing, markets have not reacted to the OPEC+ decision, with Brent around flat to the 4 September close. Still, the Libyan situation could take months rather than a week to resolve, strategists wrote.
They highlight the likelihood of a strong market surplus emerging next year, pushing prices lower.
“We recommend selling on a bounce toward ~$80 Brent, as we look ahead to moves down to the $60 range in 2025 as a sizeable market surplus emerges,” the note states.
OPEC+ has delayed the start of its planned production cut unwind from October 2024 to December 2024, with the process now set to conclude by the end of 2025. This decision comes in response to recent market weakness and price declines, despite ongoing disruptions to Libyan oil supplies and broader economic concerns in the U.S. and China.
Separately, Bank of America’s Commodities Research team has revised down its price forecast to $75 per barrel for the second half of 2024, down from nearly $90, and for 2025, reduced from $80.
The team cites concerns about growing global oil inventories despite assuming OPEC+ will delay planned production increases. They note that weaker demand growth, combined with record OPEC+ spare capacity exceeding 5 million barrels per day, has dimmed the outlook for oil prices.
“In effect, we now see Brent oil prices moving from the top toward the middle of our unchanged $60-80/bbl medium-term range faster than previously warned,” BofA strategists said. This surplus in capacity, along with slower demand, also reduces the risk of price spikes from potential geopolitical disruptions.
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